Quick Take: KPCB’s Internet Trends Report 2016

Mary Meeker’s annual Internet Trends Report was just recently released. Since it was first published in 2001, its reputation as a must-read overview of where the tech industry is going has only kept growing. It’s mostly US-focused, but a useful peek into what might be coming in other markets too. If you don’t have time to plough through all 200+ slides, here are the highlights. Check out the full presentation below.

Slides 5 to 15 look at overall Internet growth trends. The number of global Internet users is over 3 billion and growth is flat at 9%, excluding India which saw 40% year-on-year growth and surpassed the US as the #2 global Internet market behind China.

Global smartphone growth is slowing in terms of both users (+21% vs +31% year-on-year) and number of units shipped (+10% vs +28% year-on-year). The Asia-Pacific region experienced the most growth. 2015 may have been the peak year for iPhone sales, with Android overtaking iOS in growth. Average selling prices have fallen for devices on both platforms.

Slides 43-45 US Internet advertising is accelerating with 20% year-on-year growth compared to 16% last year. This trend is being driven by mobile with a 66% increase, compared to just 5% growth in desktop advertising. Google and Facebook make up a whopping 76% share of Internet advertising growth in the US.

However, advertisers are still spending relatively more ad dollars on print, radio and tv, compared to the time consumers are spending in these media. Although Google still dominates the market, Facebook’s share of US advertising revenue grew by 59% from 2014 to 2015.

We expected the report to include a bit more about marketing automation as well as the reasons why Facebook advertising is growing so quickly, especially considering that it states that mobile advertising is a $22B opportunity in the US.

Huge TV advertising budgets (currently 39% of total US advertising spend) continue to move towards online platforms like YouTube and Facebook. Facebook is able to challenge incumbents in both brand and direct response advertising. Facebook and Instagram are also winning dollars due to reach and frequency buying, Target Rating Point buying, and new video and brand awareness ad options.

Slide 67 looks at hyper-targeted marketing. The case examples of Facebook and Instagram ads, while interesting, don’t really showcase the level to which it’s already possible to do personalized targeting. Next year’s trends report will likely include more stories about hyper-targeting as marketing automation at scale is only beginning to take off. Product’s like Google’s Local Inventory Ads and Facebook’s Dynamic Ads for Travel are leading the way. This trend is driven by technology like product feed-based ads along every step of the online sales funnel, which enable news kinds of personalized retargeting and prospecting.

Slides 46-47 Advertising effectiveness still needs work. Video is growing as an ad format, but 81% of users say they mute video ads, 62% are annoyed by brands forcing pre-roll viewing and 93% are considering using ad blocking. The use of ad blocking software is on the rise as well, especially in China, Indonesia and India, with mobile ad blocking growing at 94% last year.

The survey results also list factors that can help make video advertising work, which are mostly related to the quality of the creative. Facebook and Google are trying to increase ad quality and relevance with their algorithms. In addition, Facebook has strict advertising policies and has banned some verticals.

Slide 73 Social media usage: Facebook has the biggest reach among millennials, almost 100% of 18-34-year olds in the US use Facebook. Followed by Instagram, Twitter, LinkedIn, Pinterest and Snapchat.

Slide 109 Google and Facebook account for the lion's share of Internet advertising revenue, but also of mobile app usage. The average global mobile user has about 33 apps, 12 of which they use daily. The 80/20 Pareto principle seems to almost apply here, with 3 apps accounting for 80% of app usage. In the US these apps are Facebook, Chrome and YouTube. Worldwide they’re Facebook, WhatsApp and Chrome. US mobile users spend on average one hour more per day on their phones compared to worldwide figures (5 hours vs. 4 hours).

Slide 110 Messaging apps such as Facebook Messenger are increasingly becoming the second home screen for mobile phone users. This is another indication that Facebook’s Messenger bots strategy fits into a larger trend whereby messaging is evolving from a tool for social conversations into one that serves many other types of more business-focused communications.

Slides 112 - 133: Meeker takes a special look at the evolution of voice input. She quotes Baidu Chief Scientist Andrew Ng saying that once speech recognition accuracy reaches 99% in terms of understanding and meaning, as well as low latency (already quite far developed) it will be a game changer. The report highlights the growing sales figures of Amazon’s Echo, roughly 1 million units Q1 of 2016, as an early sign that voice-based human-computer interaction is becoming increasingly common and accepted. Apple has Siri, Google has Google Now and Amazon has Echo, so will Facebook be the next one to enter the voice-based human-computer interaction business with voice bots?